20 May 2025
Setting Up a Tax-Free Company in Dubai: Advantages, Profit Calculations, and Strategic Opportunities
Is it possible to establish a tax-free company in Dubai? A detailed guide to tax advantages with the latest information on tax rates, exemptions, and profit calculations according to company types.
Dubai is one of the world's most attractive locations for entrepreneurs and investors, and one of the key reasons for this is its tax advantages. Unique opportunities such as a 0% corporate tax, no personal income tax, and the absence of capital gains tax make Dubai a true tax haven. In this article, we will share the ways to establish a company in Dubai with no or minimal taxes, which types of companies offer tax advantages, and the annual profit calculations for an average company with full transparency.
How Does the Tax System Work in Dubai?
The tax system applied across the United Arab Emirates is much more business-friendly compared to many countries. This structure offers serious opportunities for those wishing to invest in Dubai. Especially small and medium-sized enterprises can continue their activities without paying taxes with the correct setup model.
The basic tax principles are as follows:
The corporate tax is only 9% on net profits over 375,000 AED.
Profits below 375,000 AED are completely exempt from tax.
There is no personal income tax.
Tax is not levied on capital gains or dividend income.
In addition, complete exemption from corporate tax for up to 50 years is available in certain free zones. This makes Dubai an ideal location for global tax planning.
Which Companies Are Exempt from Tax?
If you wish to be exempt from tax or operate with minimal tax in Dubai, the structure of your company and the location where it operates are of great importance. Especially free zone and offshore companies are the categories that benefit the most from these advantages.
Free Zone Companies
Free zones offer 100% ownership rights, flexible office solutions, and tax advantages to foreign investors. One of the most important features is that companies categorized as "Qualified Free Zone Persons" can be exempt from corporate tax. For this exemption:
The company must serve only customers within the free zone
Must have a physical office
Complete accounting records must be maintained.
Offshore Companies
These are companies based in Dubai but not operating in the local market. They are common in business models such as international trade, digital services, and licensing. Offshore companies:
Are subject to 0% tax, provided they do not operate within Dubai.
Provide flexibility in bank accounts, virtual POS, and digital payment integrations.
Offer high advantages in terms of privacy and asset protection.
Small-scale Mainland Companies
Companies established in the mainland can trade directly within the UAE. However, those with a net annual income below 375,000 AED can still benefit from 0% corporate tax. While this model offers more flexibility, it comes with higher obligations in terms of accounting and tax tracking.
Profit Calculation Examples: How Effective Is the Tax Advantage?
To better understand the tax advantages in Dubai, let's calculate through a few realistic scenarios.
Example 1: Digital Service Company in Free Zone
Annual revenue: 450,000 AED
Expenses: 100,000 AED → Net profit: 350,000 AED
Tax: 0%, because it is below 375,000 AED
Example 2: Offshore E-commerce Company
Annual profit: 1,000,000 AED
No operations within the UAE → Tax: 0%
Example 3: Mainland Trading Company
Annual revenue: 1,200,000 AED
Expenses: 500,000 AED → Net profit: 700,000 AED
Up to 375,000 AED: 0%, the remaining 325,000 AED is 9% → Tax: 29,250 AED
Comparison Table
Company Type | Location | Net Profit | Tax Amount |
|---|---|---|---|
Free Zone | DSO | 350,000 AED | 0 AED |
Offshore | JAFZA | 1,000,000 AED | 0 AED |
Mainland | Dubai | 700,000 AED | 29,250 AED |
Strategic Tax Planning with ORTAC
To effectively benefit from either tax exemption or minimum tax advantages, simply establishing a company is not enough. The structure must fully comply with regulations, operate in the correct region, and financial transactions must be reported thoroughly.
The main supports we provide as ORTAC:
Selection of the appropriate company type based on industry and activity type
Free zone and offshore structuring strategy
Setup of a digital accounting system via Quickbooks
Monitoring of VAT and Corporate Tax declarations
Monthly, quarterly, and annual tax reporting
It is vital to receive professional support to avoid the tax burden while growing your business in Dubai and maximize your profits.
👉 To establish your company tax-free and plan your long-term profit strategy, contact us right away.
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